Changes to Trust Administration Systems
The ATO has advised that various trust administration changes are soon to come into effect. This will include changes to annual tax return forms, to simplify reporting for trustees, beneficiaries and their tax agents. These changes will begin on 1 July 2024, affecting lodgments for the 2024 and subsequent income years.
More particularly, these changes include the following (which are explained further below):
– modifying the labels in the statement of distribution (being part of the trust tax return)“to improve the reporting of beneficiary details”;
– introducing a new schedule (trust income schedule) that all trust beneficiary types who receive trust income will need to lodge with their tax return, to “assist correct reporting and facilitate consistency of reporting across all beneficiary types”; and
– adding new data validations to the trust tax return form in the ‘practitioner lodgment service’ “to strengthen the integrity of data reported through the lodgment process.”
The ATO advises that further changes will be implemented in due course, in addition to the above.
Trustees, beneficiaries and tax agents will all be affected by these changes, as set out below.
TRUSTEES
From 1 July 2024, trustees will notice a change to the labels in the statement of distribution section of their trust tax return. The ATO is adding four CGT labels into the trust tax return statement of distribution. “These changes will enhance (trustees’) ability to appropriately notify beneficiaries of their entitlement to income, and support the calculation of their CGT amount in their tax return.”
The ATO recommends that trustees provide beneficiaries with a copy of the trust statement of distribution (so far as it relates to the beneficiary’s entitlement to trust income) to assist beneficiaries in correctly completing the trust income schedule.
BENEFICIARIES
The 2024 income year tax return will look different for beneficiaries. The ATO advises them to look out for the trust income schedule, which is a new form to be lodged with their income tax return. The trust income schedule replicates the fields from the statement of distribution, so beneficiaries simply need to copy the information across.
Beneficiaries should be able to get the information required in the trust income schedule from the trust. The ATO recommends that beneficiaries ask the trustee for a copy of the trust statement of distribution (so far as it relates to their entitlement to trust income).
Beneficiaries who receive a distribution of trust income from a managed fund should also include this in the new trust income schedule. The trust income schedule instructions will show how the information on the tax statement provided by the managed fund is to be reported on the trust income schedule.
TAX AGENTS
Tax agents should be aware that, from 1 July 2024, the ATO is adding:
– four CGT labels into the trust tax return statement of distribution; and
– data validations in the practitioner lodgment service to ensure accurate reporting.
These changes mean that tax agents will no longer be able to submit without completing the necessary information.
The trust income schedule will now support the reporting of beneficiary trust income. The new schedule:
– will not replace any existing trust income labels in beneficiary income tax returns; and
– is intended to support existing reporting obligations:
~ for individual beneficiaries (and will be incorporated into the existing income details schedule);
~ for non-individual beneficiaries (via a new schedule lodged with each beneficiary income tax return).
As the trust income schedule has been designed to align to the information on the trust statement of distribution, tax agents should encourage their trustee clients to provide beneficiaries the information required to complete the trust income schedule as early as possible, to assist them in completing their tax return.
